Acronym Soup: ERPs, GLPs, and M&A

Taking stock as we approach the midpoint of the year, we are seeing providers focus on the usual growth and performance improvement initiatives, but a few notable themes have been a big focus so far this year.

ERPs

Every generation, healthcare sees a wave of enterprise software become a major investment for providers. In 2000 - 2015, it was Electronic Health Record (EHR) implementations.

Today, the wave is Enterprise Resource Planning (ERP) Systems. The systems that operate everything from payroll to HR to finance are finally moving to the cloud, requiring large, expansive implementations. Unlike the EHR wave, the ERP systems of choice are not healthcare-specific. Names like Oracle and Workday are dominating, the same systems you might see in banking or manufacturing.

Implementing an ERP system creates a golden opportunity to revamp processes in areas like supply chain, human resources, and finance. Anyone who has been tolerating workarounds and manual processes in corporately-owned areas should be able to fix them with the new ERP systems - assuming implementation is done well.

The implementations are not trivial - start-to-finish, they usually take over a year, but they create a much more streamlined chassis for the future.

Huron is the #1 implementer of ERP systems according to KLAS, for three years running.

GLP-1s

An interesting - and somewhat less-expected - topic of discussion with many of my clients in the past 12 months has been GLP-1 drugs. The discussion has focused on two separate angles:

As an employer. The benefit cost of covering GLP-1 drugs as a self-insured employer has grown into seven figures for many larger health systems — and most large providers are self-insured. Some providers are covering the drugs only if an employee medically requires the drug (e.g. pre-diabetic.) Others have chosen to grandfather-in employees who had started taking the drug by a certain date. The financial impact is material, considering the $9,000 - $15,000 annual price tag – lifelong -- for the drugs.

As a provider. Systems have long been offering bariatric surgeries as a weight-loss intervention. After several years of 10%+ growth, bariatric surgery volumes are down. Many speculate that the downturn is temporary. Patients in this category have likely be trying GLP-1s to see if they are an effective intervention, but many will eventually decide to do the surgeries, which have proven to provide more sustainable results, don’t have the side effects of the GLP-1 drugs, and do not require the considerable lifelong spend.

Medicare and Medicaid currently pay for the drugs, but not all private plans do. We are watching closely, as we think Medicare and Medicaid will put some curbs on covering the expensive drugs.

M&A

M&A has been active in 2024. Private equity is more active again after being frozen during the rising rate period. Large health systems seem open to JVs. For-profits are in sell mode as they reposition their portfolios. They are redefining what their core focus is, and divesting assets that are not aligned with it.

Hot M&A Areas as we enter midyear are Medical Aesthetics, Home Health, and ASCs. These asset types remain robust in the level of activity, expansion, and JV’ing that we are seeing. Medical aesthetics, in particular, is a double-digit annual growth driver with very favorable payer mix and is attracting plenty of private equity dollars. On the ASC front, we are seeing higher-acuity cases decant to outpatient settings, along with the continued shift to outpatient-based procedures.

The table below shows selected M&A in Q2.

What’s Right in Health Care conference

Huron is hosting it’s annual What’s Right in Health Care conference, August 26-28 in Denver. You can see details here.

If you are a healthcare provider executive or manager and interested in excellent content around healthcare operational excellence, human capital management, quality, along with some great peer networking, let me know and I can help you get registered.